Graduation Year

Spring 2012

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Jungmo Yoon

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2012 Daniel K. Lee

Abstract

According to Fama (1980), the agency theory states that in order to avoid issues of moral hazard and adverse selection problems, executive compensation should be in alignment with performance. However, it is difficult to identify specific performance measures that are both precise and sensitive, especially when concerning corporate executives who typically do not give out public information. In order to analyze the validity of the agency theory, this study uses the scope of NCAA Division I-A football to analyze the relationship between pay and performance with respect to head coaches. We investigate factors that various literature on executive compensation have identified as associated variables such as organization size, job complexity, market competition, ability to attract talent, and mentorship.

Through multiple regression analysis, results showed that size, ability to attract talent (recruiting ability), competition, and academic success were significantly positively associated with coach compensation. There was no significant association for winning games or mentorship, however. Because winning had no effect on salaries, we concluded that the agency theory did not hold for the specific context of Division I-A college football.

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